Chancellor Rishi Sunak delivered his Autumn Budget – billed as preparing the country for post-Covid recovery and an ‘age of optimism’ – against a backdrop of previously announced tax increases.
National Insurance Contributions are already set to increase from April next year and Corporation Tax increases will take effect from 2023. Given the pressure these additional costs will bear on businesses, Armstrong Watson’s Chief Executive says there will be general relief that further tax increases were not announced.
Promising his budget would deliver a “stronger economy for the British people”, as part of a business rates reform, Mr Sunak announced “the biggest tax cut to business rates in 30 years” for businesses in the retail, hospitality and leisure sector – a discount of 50%, up to £110,000, on their bills.
What the Chancellors said is a tax cut of £1.7bn is in fact an extension to previously cut business rates for the sector during the pandemic but a move that will still be welcomed by hospitality businesses still in recovery.
Paul Dickson, CEO and Managing Partner said: “For families and local businesses, overall this budget is a positive and more generous one than was expected.
“The extension to a number of reliefs, such as the continued extension of the Annual Investment Allowance, and extension of business rates cut for the hospitality and retail sector are welcome.
“The freeze in fuel duty is a welcome support for businesses at a time where we are seeing increasing costs coming from all sides. Also welcome is the reduction of the taper on Universal Credits, as hopefully, this will provide a greater incentive for individuals to work more hours in a time where many businesses are struggling for resources, again particularly in the hospitality and retail sectors.”
He added though: “Mr Sunak’s speech was perhaps notable for what was seemingly a major omission in that it made no reference to the impact of climate change on the Government’s tax and spending plans. There was, for example, no mention of where the estimated £10bn that will need to be provided over the next three years to insulate homes if the Government is to meet its own climate change targets.”
The Chancellor acknowledged that the tax burden is now at a historically high level and he will undoubtedly hope that he can reverse some of the increases or announce other tax cuts before the next election. But with the cost of living now rising, the fundamental question seems to be whether those increases will be funded by increased economic output and efficiency, as the Prime Minister has recently said they will, or whether they will act as a drag on overall economic growth. Whichever turns out to be the correct answer may well have a major bearing on the Government’s popularity over the second half of its current term and ultimately its prospects for success at the next general election.